An AI bubble burst would trigger a sectoral collapse that cascades into a systemic economic crisis due to constrained policy responses and deteriorating foreign demand for U.S. Treasuries.

"Foreign demand for U.S. Treasuries is already retreating, and the bursting of the bubble will make the retreat faster with a predictable effect on interest rates... a sectoral collapse – like the bursting of the AI bubble followed by a collapse of capital expenditures and wealth destruction – can easily turn into a systemic event."